v3.26.3
Fair Value Measurement
 9 Months Ended
Sep. 30, 2026
Fair Value Disclosures [Abstract]  
Fair Value Measurement
Note 10—Fair Value Measurement
We carry a portion of our assets and liabilities at fair value that are measured at the reporting date using an exit price (i.e., the price that would be received to sell an asset or paid to transfer a liability) and disclosed according to the quality of valuation inputs under the fair value hierarchy.
The classification of an asset or liability is based on the lowest level of input significant to its fair value. Those that are initially classified as Level 3 are subsequently reported as Level 2 when the fair value derived from unobservable inputs is inconsequential to the overall fair value, or if corroborated market data becomes available. Assets and liabilities initially reported as Level 2 are subsequently reported as Level 3 if corroborated market data is no longer available. There were no material transfers into or out of Level 3 during the nine-month period ended September 30, 2026, or during the year ended December 31, 2025.
Recurring Fair Value Measurement
Financial assets and liabilities reported at fair value on a recurring basis include our investments in debt securities classified as available for sale, commodity derivatives and our contingent consideration arrangement related to the Surmont acquisition.
•Level 1 derivative assets and liabilities primarily represent exchange-traded futures and options that are valued using unadjusted prices available from the underlying exchange. Level 1 financial assets also include our investments in U.S. government obligations classified as available for sale debt securities, which are valued using exchange prices.
•Level 2 derivative assets and liabilities primarily represent OTC swaps, options and forward purchase and sale contracts that are valued using adjusted exchange prices, prices provided by brokers or pricing service companies that are all corroborated by market data. Level 2 financial assets also include our investments in debt securities classified as available for sale including investments in corporate bonds, commercial paper, asset-backed securities, U.S. government agency obligations and foreign government obligations that are valued using pricing provided by brokers or pricing service companies that are corroborated with market data.
•Level 3 derivative assets and liabilities consist of OTC swaps, options and forward purchase and sale contracts where a significant portion of fair value is calculated from underlying market data that is not readily available. The derived value uses industry standard methodologies that may consider the historical relationships among various commodities, modeled market prices, time value, volatility factors and other relevant economic measures. The use of these inputs results in management’s best estimate of fair value. Level 3 commodity derivative activity was not material for all periods presented.
•Level 3 liabilities previously included the fair value of future quarterly contingent payments associated with the Surmont acquisition. The fair value of the liability under the agreement was nil at December 31, 2025. During the nine-month period ended September 30, 2026, we made a final payment of $81 million USD under the contingent consideration arrangement, bringing cumulative payments since the acquisition date to $0.3 billion USD. Payments are included in the "Other" line within the financing activities section of our consolidated statement of cash flows.
The following table summarizes the fair value hierarchy for gross financial assets and liabilities (i.e., unadjusted where the right of setoff exists for commodity derivatives accounted for at fair value on a recurring basis):
Millions of Dollars
September 30, 2026December 31, 2025
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
Assets
Investments in debt securities
$266 1,331 — 1,597 270 1,331 — 1,601 
Commodity derivatives
1,001 465 37 1,503 306 230 68 604 
Total assets
$1,267 1,796 37 3,100 576 1,561 68 2,205 
Liabilities
Commodity derivatives979 288 104 1,371 354 124 60 538 
Total liabilities
$979 288 104 1,371 354 124 60 538 

The following table summarizes those commodity derivative balances subject to the right of setoff as presented on our consolidated balance sheet. We have elected to offset the recognized fair value amounts for multiple derivative instruments executed with the same counterparty in our financial statements when a legal right of setoff exists.
Millions of Dollars
Amounts Subject to Right of Setoff
Gross
Amounts
Recognized
Amounts Not
Subject to
Right of Setoff
Gross
Amounts
Gross
Amounts
Offset
Net
Amounts
Presented
Cash
Collateral
Net
Amounts
September 30, 2026
Assets$1,503 50 1,453 1,067 386 44 342 
Liabilities1,371 47 1,324 1,067 257 51 206 
December 31, 2025
Assets$604 2 602 361 241 6 235 
Liabilities538 1 537 361 176 53 123 
At September 30, 2026, and December 31, 2025, we did not present any amounts gross on our consolidated balance sheet where we had the right of setoff.
Reported Fair Values of Financial Instruments
We used the following methods and assumptions to estimate the fair value of financial instruments:
•Cash and cash equivalents and short-term investments: The carrying amount reported on the balance sheet approximates fair value. For those investments classified as available for sale debt securities, the carrying amount reported on the balance sheet is fair value.
•Accounts and notes receivable (including long-term and related parties): The carrying amount reported on the balance sheet approximates fair value.
•Investments in debt securities classified as available for sale: The fair value of investments in debt securities categorized as Level 1 in the fair value hierarchy is measured using exchange prices. The fair value of investments in debt securities categorized as Level 2 in the fair value hierarchy is measured using pricing provided by brokers or pricing service companies that are corroborated with market data. See Note 9.
•Accounts payable (including related parties) and floating-rate debt: The carrying amount of accounts payable and floating-rate debt reported on the balance sheet approximates fair value.
•Fixed-rate debt: The estimated fair value of fixed-rate debt is measured using prices available from a pricing service that is corroborated by market data; therefore, these liabilities are categorized as Level 2 in the fair value hierarchy.
•Commercial paper: The carrying amount of our commercial paper instruments approximates fair value and is reported on the balance sheet as short-term debt.
The following table summarizes the net fair value of financial instruments (i.e., adjusted where the right of setoff exists for commodity derivatives):
Millions of Dollars
Carrying Amount
Fair Value
September 30
2026		December 31
2025		September 30
2026		December 31
2025
Financial assets
Commodity derivatives
$392 237 392 237 
Investments in debt securities
1,597 1,601 1,597 1,601 
Financial liabilities
Total debt, excluding finance leases
22,546 22,643 21,327 22,698 
Commodity derivatives
253 124 253 124